Service Industry, lower minimum wage?

Kinetic^

Wasn't sure if this was for Work & Jobs or Consumer Issues or Economics as it affects all 3 but it's being put here for the moment anyway. For the below example let's presume we're talking about the publican trade.

Something struck me the other night as I got the usual crap service in Pizza Hut......how would Ireland cope with having the service industry on a lower minimum wage?? This would leave staff relying on tips from customers. It would be a radical move and would probably leave alot of people out of a job, as quite frankly, they just couldn't cut it. Granted you generally get good service in the top end restaurants but the likes of Pizza Hut or Eddie Rocket's or whatever pub you drink in, would you like to see better service or are you happy with the way it is?

Money to the revenue would be down due to lower employer's PRSI and lower employee's PAYE & PRSI (granted your supposed to claim all income, including tips but somehow I doubt the vast majority would claim all their tips to the revenue).

With lower labour costs, cost of items would be lower which would affect lower VAT collections.

Obviously there would be less revenue being generated by a pub but there could still be the same gross profit % and the same net profit if it was managed correctly.

I reckon it would affect immigration too with people hesitant to come over when they are expected to work for there money.

Economics isn't my background at all so I'm leaving it at that as I'm sure the more experienced people out there will add or take away from what I've said. There's no way the government would ever let it happen but if you feel that it would be of benefit to the country, Vote for me

Kinetic^

Anyone?

Stupid economics forum with your stupid lack of traffic

J.S. Pill

Kenny 5 wrote:

Wasn't sure if this was for Work & Jobs or Consumer Issues or Economics as it affects all 3 but it's being put here for the moment anyway. For the below example let's presume we're talking about the publican trade.

Something struck me the other night as I got the usual crap service in Pizza Hut......how would Ireland cope with having the service industry on a lower minimum wage?? This would leave staff relying on tips from customers. It would be a radical move and would probably leave alot of people out of a job, as quite frankly, they just couldn't cut it. Granted you generally get good service in the top end restaurants but the likes of Pizza Hut or Eddie Rocket's or whatever pub you drink in, would you like to see better service or are you happy with the way it is?

There are people on this board who are much better at explaining this type of thing than I am but I'll give it a go:

I take it that the objective of our minimum wage reduction is to increase the quality of service by making workers more reliant on tips which, if you like, act as a kind of peice-rate payment for good service?? I'm sure workers would be a lot friendlier and all if collecting tips made the difference between paying the rent and not paying the rent.

Conversely they probably wouldn't care much about tips if their basic pay was very comfortable. If basic wages lie somewhere in between then surely tips are going to act as an incentive for good service to some degree but to what degree is the question - it would be very difficult for the employer to determine at what wage level this mechanism works where it improves customer service without being offset too much by increased staff turnover as a result of lower and more unpredictable wages (if you have to hire new people every week customer service is going to suffer - think plates of spagetti dropped on customers heads!)

Kenny 5 wrote:

Money to the revenue would be down due to lower employer's PRSI and lower employee's PAYE & PRSI (granted your supposed to claim all income, including tips but somehow I doubt the vast majority would claim all their tips to the revenue).

Employees hovering around the minimum wage don't pay too much in the way of PAYE. (I'm one of those employees) so revenue from PAYE isn't much of an issue here

Kenny 5 wrote:

With lower labour costs, cost of items would be lower which would affect lower VAT collections. Obviously there would be less revenue being generated by a pub but there could still be the same gross profit % and the same net profit if it was managed correctly.

Firstly, if the cost of 'items' (services in this instance) were to be lowered then the pro rata VAT take on these items may be reduced, however, customers will, on most occasions, spend the money they save on something else and therefore VAT receipts wouldn't be affected too much in the overall economy. However, we must remember that for this decrease in the cost of the 'items' to occur, employers would have to pass the savings they make from lower wages on to consumers. If they can get away with it they wont. Our market (in this case pubs, fast food outlets and more upmarket eateries) would need to be largely perfectly competitive for this price reduction to happen (in a perfectly competitive market, if a firm sees an opportunity to undercut its competitors in price, stemming in this case from a reduction in wages, then it invariably will. As this wage decrease will apply across the sector then firms will be left with little choice). Its very difficult to know how much a reduction in wages will effect the costs of services across this sector because these outlets compete on much more than price i.e. their services are very much differentiated (type and quality of food, ambience, location etc.).

Kenny 5 wrote:

I reckon it would affect immigration too with people hesitant to come over when they are expected to work for there money.

Only insofar as a lower and more unpredictable wages would make people think twice about how they can support themselves over here but so long as they get a better overall deal than if they stayed at home they'll keep filling these positions. Simple as that

Kenny 5 wrote:

Economics isn't my background at all so I'm leaving it at that as I'm sure the more experienced people out there will add or take away from what I've said. There's no way the government would ever let it happen but if you feel that it would be of benefit to the country, Vote for me

Only if you run as an independent.

OTK

Your idea is based on the premise that tips are proportional to service standard. Is this true? I believe that people tip according to the cultural norms of the country they're in, how good looking the waitress appears, how generous they are, and so on. There are economic papers on this which you can search for. From a consumer's point of view, tipping is complicated, requiring change, calculation and awkward social situations (in the US, a waiter sometimes challenges you if the tip is below normal %). If you intend to eat there again, do you trust that the waiter won't gob in your dinner behind the swingdoors?

The market for restaurants and cafés is highly competitive in cities. Think of the number of places you can get your lunch in Dublin (every pub, spar, centra, fast food and so on). The incentive to provide good service is there for the owner, who will go out of business if the service/product/price mix is wrong. Barriers to entry are low and many businesses fail.

From the state's point of view, tipping means black economy - revenue lose on PAYE/PRSI receipts (although these are low at this level).

Finally, I'd prefer sincerity to the fake smiles I get in a high-tipping country. You're a waitress - you have a crap job, I'm not asking you to appear happy for my sake. And if you do smile it's nice to know you mean it.

dermo88

I suspect any of these ideas are brought up by people who never worked in the service sector. It can be unpleasant, badly paid, demoralising. Often (for staff), its not about the money, but how well you are actually treated as a human being by management. That was my experience as a student.

We moaned about the wages then, but looking back, I recognise that its temporary, and you are paid according to the experience you have. People can and will always work hard, but theres a difference between working hard and working smart.

Using an analogy, based on experience - working hard means being run around on St Patricks Day in a bar, serving pints, dodging hyperactive kids on Coke, Yop and Tayto with a tray of pints, and getting someone complain to the manager that you left them 2 pence short in their change (Yes, this was the early-mid 1990's, people were THAT petty), mopping floors, cleaning up vomit, cleaning ashtrays and waiting on the last drunk to leave after cleaning up at 1.00am, and practically worshiping the after work pints to relieve the stress......Working smart means having the experience to the point where you are trusted to watch who is doing what, assist them, count the cash, balance the takings. More responsible, better paid, less physical.

The service industry would be far better served by lower rates of VAT and Excise Duty on its products that on lower minimum wage rates.

Its down to good management as well. If they treat their staff well, pay them fairly (There is a difference - you can have low paid staff treated fairly, or well paid staff treated like ****). If you have support all the way from the top, you can have low pay. If you have management who pay minimum wage, and throw in an extra 10, 20 or 50 Euro every so often as a bonus when the staff do not expect it, they have smiles.

Irish people, in my experience, WERE bad tippers. But there was'nt as much money around then, and it has changed since. In the early - mid 1990's, we'd work hard to get 10 quid in tips on a Friday night in a pub.

I always tip a waiter if I am in a group....between 50 cent and 2 Euro based on the amount I order. If its less than 10-15 Euro, its the shrapnel. Otherwise I go to the bar.

And I do not believe one word out of the Vintners Federation of Ireland.

Kinetic^

dermo88 wrote:

I suspect any of these ideas are brought up by people who never worked in the service sector.

I served as a loung boy when I was 15 and then as a barman when I was 18/19 so I've worked in the industry....back then tips equaled my wages as a lounge boy, now tips are a multiple of your wages.

dermo88

Ok, I stand corrected.

When I worked as a Loungeboy and a barman, where I worked, the tips were not shared. The lads got to do the physical work, and were paid the same as the girls, who worked the floor. The girls made three times as much as the lads did in tips. If I am honest, I got on quite well with all staff, and kept my feelings to myself. I DID resent the fact that the lads made less money on working the floor than the girls, and had less of a chance to make money on tips. However, our promotional prospects were much better, and our ability to move to another pub in the industry with higher pay.

Also, prices, even in relation to inflation now were much lower, particularly on Spirits and mixers.

Take a typical table of six people on a Friday night, three girls, three lads, spread out all ages from 21-50, and the prices are from 1994-1995 in a suburban Dublin pub.

Guinness IEP1.75 (male)
Budweiser IEP1.96 (male)
Brandy and Ginger Ale (Brandy IEP2.03, Ginger Ale IEP0.68) (girl)
Ritz IEP2.18 (girl)
Vodka and Lemonade (Splash) Vodka IEP1.51, Lemonade Splash IEP0.30
Jameson and Red - Jemmy IEP1.60, Red Lemonade IEP0.30

Total IEP12.31, customer scoops out a twenty, give back 7.69, customer gives back 69 pence. Or, if they have'nt tipped all night, they will give a pound at the end of the night if you are lucky.

Take the same order today, and I am guessing a few of these now.

Guinness EUR3.80 (male)
Budweiser EUR4.50 (male)
Brandy and Ginger Ale (Brandy EUR4.50, Ginger Ale EUR1.30) (girl)
Ritz EUR4.20 (girl)
Vodka and Lemonade (Splash) Vodka EUR3.80, Lemonade Splash EUR0.60
Jameson and Red - Jemmy EUR4.00, Red Lemonade EUR0.60

Total comes to EUR27.30, hand over 30, staff gives back 2.70, give staff 2.00

Wages....IEP2.50 per hour, no pay after 23:30, clean up, and get out by 01.00. Young Part-time barmen started on IEP3.50, and this went up to IEP4.25

Wages now....EUR8.00 (?) per hour.

I reckon I worked in the wrong place, and I would'nt mind having the same job these days as a student, in a cleaner environment, more regulation, and a smoking ban (I smoke, but I doubt I would have started without working there)

shoegirl

Kenny 5 wrote:

Something struck me the other night as I got the usual crap service in Pizza Hut......how would Ireland cope with having the service industry on a lower minimum wage?? This would leave staff relying on tips from customers. It would be a radical move and would probably leave alot of people out of a job, as quite frankly, they just couldn't cut it.

Its a reasonable point, but when there was no minimum wage service industry service was equally if not more deplorable than it is now. I have to say that immigration has largely improved customer service in the service industry - except for where employers hire people with no english. Maybe it is because migrant workers from lower paid economies don't feel the demotivation felt by native workers who are all too well aware of being "bottom of the heap"? I don't know but generally find migrant workers to be more courteous and less resentful.

There is a large supermarket, one of the last of the large non-chain stores in Dublin, in north county Dublin which used to employ a large body of locals. Aside from the fact that many openly robbed the place, a large number of staff were so rude and resentful they practically sneered and scowled at customers as they "served" them. The guy eventually brought over a load of Chinese people, who were loved by customers as they were courteous (and no doubt by the owner, who no longer had to deal with mother's of sons who had been sacked for having openly thieved the place looking for him to reinstate them "Ah sure Mr XXXXXX he didn't mean to rob de place, honestly.")

shoegirl

J.S. Pill wrote:

Employees hovering around the minimum wage don't pay too much in the way of PAYE. (I'm one of those employees) so revenue from PAYE isn't much of an issue here


...... Its very difficult to know how much a reduction in wages will effect the costs of services across this sector because these outlets compete on much more than price i.e. their services are very much differentiated (type and quality of food, ambience, location etc.).

Excellent post - with a brain like yours, you should be paid a hell of a lot more than the minimum wage!

J.S. Pill

shoegirl wrote:

Excellent post - with a brain like yours, you should be paid a hell of a lot more than the minimum wage!

Well my knowledge of economics means that I don't interpret my sh*ty wages as being in any way reflective of my brain power! - I know that its simply a case of there being a huge supply of potential employees for a handful of companies in my locality. Ces't la vie or whatever...